The pandemic brought on a once-in-a-generation boom in the home furnishings business, as Americans reconsidered every aspect of their homes—and pulled out their credit cards. But even as the surge continues, a shadow is emerging that could threaten aspects of the industry for years to come.

Private equity firms, real estate investment trusts and large public corporations are increasingly buying or building single family homes and condominium complexes as a vehicle not to sell, but to rent. Snapping up properties creates a steady, long-term stream of revenue for themselves, but with a tight housing market that is showing serious shortages in inventory, this means fewer homes are available for sale to actual humans

And therein lies the issue for home furnishings companies: with more renters and fewer owners as percentages of the overall housing market, certain product categories are going to suffer. Homeowners tend to invest more in their homes, buying more high-quality, longer lasting products. These rental properties may come furnished, and the companies renting them are more likely to mass-purchase a lower standard of home goods compared to what individual owners might.

What’s currently a murky threat could soon become clearer. Current numbers show that institutional investors are much more heavily involved in the multi-family rental segment: According to a Wall Street Journal report, they own 55 percent of the total U.S. supply of these kinds of properties, primarily condos. They are currently estimated to own only about two percent of the more lucrative single-family properties in the country, the Journal said, citing statistics from Amherst Capital.

Some of these property owners are very large financial investors—including Blackstone, KKR, Invitation Homes and American Homes 4 Rent—which are unlikely to rest when they’ve just found a great future opportunity. For the home furnishings sector, however, this trend may already be impacting sales of certain products often associated more with homeowners than renters:

• Flooring: Homeowners,historically, put in wall-to-wall carpeting and high-quality hard flooring, products that stay with the house. Renters tend to deal with whatever flooring they’re handed, possibly decorating with peel-and-stick tiles or rugs.

• Lighting: Again, homeowners who expect to stay in a home for many years and want to invest in it would be more apt to install hard-wired lighting fixtures, while renters buy portable lighting that goes with them to their next home.

• Kitchen and bath: These are the spaces that age the fastest, while being the most expensive to renovate. Renters tend not to invest in these remodels, and go with whatever came with the property.

Of course, this twisting of the housing market does have an upside for some categories. We can expect to see a continued upturn in furniture-rental businesses, which would be consistent with this trend. Both renters and the investment firms that own these properties could go the furniture-rental route as a way to keep capital expenditures in line. There may also be more spending on home decor accents—like decorative pillows, bed and bath textiles and wall art—as renters try to personalize these spaces with items they know they can take with them at the end of their leases.

The exact impact of the surge in the rental housing market is very difficult to gauge given all the other variables in the marketplace. But it is a factor that may only increase,and both suppliers and retailers in the home space should be aware of it in planning their assortments and merchandising strategies.

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